Undisclosed income on the basis of cheques found during the course of search — Cheques received from various parties as security against advances made in cash out of undisclosed income — Amount not recovered by assessee telescoped against undisclosed inco

During course of search, certain cheques were found from
premises of the assessee, which were received from various parties as a security
against loans advanced to them by the assessee in cash out of undisclosed
income. Loans were not repaid as confirmed by the parties. Addition was made by
the AO as an undisclosed income.

Upon further appeal to the CIT(A), addition was deleted on
the basis of his own order in the assessee’s brother’s case on the inference
that on the face of evidence, money lent for money-lending business had not been
recovered as per the statements of debtors placed on record.

The decision of CIT(A) in the assessee’s brother’s case was
upheld by the Tribunal. However, the learned Judicial Member set aside the
matter on the ground that the decision of the Tribunal in the case of the
assessee’s brother is entirely on different point. The learned Accountant Member
did not agree and the matter was referred to the Third Member.

In the assessee’s brother’s case, the Tribunal accepted the
assessee’s plea that no income accrued to the assessee as the cheques remained
unencashed. The amount not recovered by the assessee is telescoped against the
undisclosed income assessed on the basis of same cheques. This ratio is
applicable in the present case also. On the same set of facts, a Co-ordinate
Bench of the Tribunal cannot come to a diametrically opposite conclusion than
arrived at in the earlier case. The names of creditors do not matter. Therefore,
the addition was deleted.